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February 22, 2024

Import and Export Trade Business Mitigating FX Risk in Smart Way

Mrs. Wu operates her store selling Australia health products on China e-commerce platforms. Due to the settlement period on these platforms, Mrs. Wu needs to use platform orders to obtain financing in USD, which she then converts to AUD to pay her Australian suppliers. Additionally, after receiving the settlement in Chinese Yuan (CNH), Mrs. Wu needs to exchange the CNH into USD to repay the USD loan and interest. This operation carries significant risks during exchange rate fluctuations. So, how should Mrs. Wu mitigate these risks and manage cash flow?

Mr. Zhang runs a cross-border export e-commerce business, primarily selling competitive products on well-known e-commerce platforms such as Amazon and Shopify. Having lived and worked overseas for many years, Mr. Zhang has a deep understanding of the overseas market's demands. He usually selects products in advance and stores them in overseas warehouses at the destination to enhance the shopping experience for overseas buyers and capture trending products. To ensure a smooth process, Mr. Zhang needs to pay for the products in CNH in advance and convert the earnings, denominated in USD, after the customer's purchase is completed. Similarly, this operation is susceptible to exchange rate fluctuations, making it challenging to estimate earnings. So, how should Mr. Zhang mitigate risks and save costs?

Although Mrs. Wu and Mr. Zhang are in different countries and industries, they coincidentally chose KVB's FX Forward services to address their urgent needs. KVB provides professional FX Forward services to cross-border enterprises, e-commerce businesses, and foreign trade partners. Through KVB's FX Forward, you can lock in the exchange rate for a specific date in the future, increasing risk mitigation capabilities and better managing corporate cash flow by reducing foreign exchange risks. Additionally, KVB's FX Forward services allows precise scheduling down to the day and offers the flexibility to settle orders in advance or postpone them, tailoring a foreign exchange plan to meet your specific requirements.

With the help of KVB's FX Forward services, Mrs. Wu saved CNH 87,750 in exchange costs in a particular transaction.

FX Forward AUD — Mr. Zhang utilized KVB's FX Forward services and saved $10,000 in costs during a transaction. For small and medium-sized enterprises (SMEs) , managing foreign exchange positions and risks is challenging. Based on years of industry experience, KVB offers four valuable management suggestions for small and medium-sized enterprises: Develop an understanding of foreign exchange positions and risks to reduce speculative behaviorIdentify scenarios in business operations that may generate foreign exchange positionsDevise different strategies for dealing with different ways of generating foreign exchange positionsActively seek appropriate credit and financial tools for management and hedging KVB Global has been deeply involved in the financial market for over 20 years and is a trusted partner for overseas Chinese worldwide. Through our pre-order foreign exchange service, we aim to provide new momentum for your business, helping you save costs, mitigate risks, and enhance cash flow management capabilities. Note: KVB Trading (Hong Kong) Limited is licensed as money service operator(license no. 13-03-01142) and regulated by the Hong Kong Customers and Excise Department. Clients who wish to deal FX Forward transaction with KVB must provide international trade-related purchases orders and trade invoices on the booking date. This service will be provided by KVB Trading (Hong Kong) Limited. Disclaimer: The content of this article represents the author's personal views and does not reflect the position of KVB. It is provided for readers' reference only and should not be construed as investment advice. The originality and accuracy of the statements and content in this article have not been verified by our company. We make no guarantee or commitment regarding the truthfulness, completeness, or timeliness of the entire or partial content and statements in this article. Please independently verify the relevant information.